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AMERESCO, INC.

(AMRC)
  Report
Delayed Nyse  -  04:00 2022-09-29 pm EDT
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AMERESCO, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/02/2022 | 11:04am EDT
You should read the following discussion and analysis of our financial condition
and results of operations together with our unaudited condensed consolidated
financial statements and the related notes thereto included in Part I, Item 1 of
this Quarterly Report on Form 10-Q and the audited consolidated financial
statements and notes thereto and management's discussion and analysis of
financial condition and results of operations for the year ended December 31,
2021 included in our Annual Report on Form 10-K ("2021 Form 10-K") for the year
ended December 31, 2021 filed on March 1, 2022 with the U.S. Securities and
Exchange Commission ("SEC"). This Quarterly Report on Form 10-Q contains
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Forward looking
statements include statements regarding our strategy, future operations, future
financial position, future revenues, projected costs, prospects, plans,
objectives of management, expected market growth and other characterizations of
future events or circumstances. All statements, other than statements of
historical fact, including statements that refer to our expectations as to the
future growth of our business and associated expenses; our expectations as to
revenue generation; the future availability of borrowings under our revolving
credit facility; the expected future growth of the market for energy efficiency
and renewable energy solutions; our backlog, awarded projects and recurring
revenue and the timing of such matters; our expectations as to acquisition
activity; the impact of any restructuring; the uses of future earnings; our
intention to repurchase shares of our Class A common stock; the expected energy
and cost savings of our projects; the expected energy production capacity of our
renewable energy plants; the results of the SEC's investigation into our revenue
recognition and compensation practices in our software-as-a-service businesses;
the impact of the ongoing COVID-19 pandemic and supply chain disruptions and
shortage of materials; our expectations related to our agreement with SCE
including the impact of any delays; the impact of the U.S. Department of
Commerce's solar panel import investigation and other characterizations of
future events or circumstances are forward-looking statements. Forward looking
statements are often, but not exclusively, identified by the use of words such
as "may," "will," "expect," "believe," "anticipate," "intend," "could,"
"estimate," "target," "project," "predict" or "continue," and similar
expressions or variations. These forward-looking statements are based on current
expectations and assumptions that are subject to risks, uncertainties and other
factors that could cause actual results and the timing of certain events to
differ materially and adversely from future results expressed or implied by such
forward-looking statements. Risks, uncertainties and factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in the section titled "Risk Factors," set forth in Part I, Item 1A of our 2021
Form 10-K, Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2022 and elsewhere in this Quarterly Report on Form 10-Q ("Q1
2022 Form 10-Q"). Subsequent events and developments may cause our views to
change. However, while we may elect to update these forward-looking statements
at some point in the future, we have no current intention of doing so and
undertake no obligation to do so except to the extent required by applicable
law. You should, therefore, not rely on these forward-looking statements as
representing our views as of any date subsequent to the date of this Quarterly
Report on Form 10-Q.

Overview

Ameresco is a leading clean technology integrator with a comprehensive portfolio
of energy efficiency and renewable energy supply solutions. We help
organizations meet energy savings and energy management challenges with an
integrated comprehensive approach to energy efficiency and renewable energy.
Leveraging budget neutral solutions, including energy savings performance
contracts ("ESPCs") and power purchase agreements ("PPAs"), we aim to eliminate
the financial barriers that traditionally hamper energy efficiency and renewable
energy projects.

Drawing from decades of experience, Ameresco develops tailored energy management
projects for its customers in the commercial, industrial, local, state, and
federal government, K-12 education, higher education, healthcare, public housing
sectors, and utilities.

We provide solutions primarily throughout North America and the U.K. and our
revenues are derived principally from energy efficiency projects, which entail
the design, engineering, and installation of equipment and other measures that
incorporate a range of innovative technology and techniques to improve the
efficiency and control the operation of a facility's energy infrastructure; this
can include designing and constructing a central plant or cogeneration system
for a customer providing power, heat and/or cooling to a building, or other
small-scale plant that produces electricity, gas, heat or cooling from renewable
sources of energy. We also derive revenue from long-term O&M contracts, energy
supply contracts for renewable energy operating assets that we own,
integrated-PV, and consulting and enterprise energy management services.

In addition to organic growth, strategic acquisitions of complementary
businesses and assets have been an important part of our growth enabling us to
broaden our service offerings and expand our geographical reach. In December
2021, we completed the acquisition of Plug Smart, an Ohio-based energy services
company that specializes in the development and implementation of budget neutral
capital improvement projects including building controls and building automation
systems. This acquisition allowed us to expand our existing pipeline and
solution offerings in the smart buildings sector. The pro forma effects of this
acquisition were not material to our operations for the fiscal quarters
presented.



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Key Factors and Trends

The Southern California Edison ("SCE") Agreement


In October 2021, we entered into a contract with SCE to design and build three
grid scale battery energy storage systems ("BESS") at three sites near existing
substation parcels throughout SCE's service territory in California with an
aggregate capacity of 537.5 MW. The engineering, procurement and construction
price is approximately $892.0 million, in the aggregate, including two years of
O&M revenues, subject to customary potential adjustments for changes in the
work.

We are obligated under the SCE Agreement to achieve substantial completion of
all facilities, subject to extension for specified force majeure events and
customer-caused delays, no later than August 1, 2022 (the "Guaranteed Completion
Date"). If we fail to meet the Guaranteed Completion Date at any of the
facilities, other than as a result of specified force majeure events, we may be
required to pay liquidated damages up to an aggregate maximum of $89 million,
and under certain circumstances SCE may have a right to terminate the agreement.
We have also provided availability and capacity guarantees under the SCE
Agreement, failure of which entitles the customer to liquidated damages.

As previously disclosed at the end of March 2022, our battery supplier for the
SCE battery storage project indicated that the COVID-19 lockdowns in several
regions around China were having an adverse impact on the supplier's ability to
deliver batteries on the agreed upon timeline. In addition, the supplier
indicated that newly implemented Chinese transportation safety policies may
cause delays in the shipment of a portion of the batteries. Following a review
of these circumstances, we provided SCE with a force majeure notice under the
SCE Agreement as we, at the time of providing the notice, determined that these
circumstances may prevent us from fully completing all three BESS projects by
the August 1, 2022 Guaranteed Completion Date. Considering the impact of these
delays with other supply chain and permitting challenges, we now expect 200 to
300 MW of capacity to be in service in September 2022 and we expect to achieve
substantial completion for all the projects by the end of 2022. Under the SCE
Agreement, the occurrence of force majeure events, including certain
COVID-related delays, results in extensions of required completion deadlines
without liquidated damages and an increase in the contract price, subject to the
party claiming a force majeure event being in compliance with its contractual
obligations. We are continuing discussions with SCE regarding the applicability
and scope of any force majeure relief relating to these circumstances, and are
also actively working with SCE, our suppliers, and governmental agencies to
mitigate delays.

We expect a material portion of our revenue for 2022 to be generated from this SCE Agreement.

COVID-19, Supply Chain Disruptions, and Other Global Factors


We continue to monitor the impact of COVID-19 on our operations, financial
results, and liquidity. The impact to our future operations and results,
however, remains uncertain and will depend on a number of factors, including,
but not limited to, the emergence and spread of more transmissible variants, the
overall duration and severity of the pandemic, and its impact on the global
economy, our customers, and business and workforce disruptions. Infection rates
and regulations continue to fluctuate in various regions and there are ongoing
global impacts resulting from the pandemic that may persist, including
challenges and increases in costs for logistics and supply chains, such as
increased port congestion, and intermittent supplier delays as well as shortage
of certain components needed for our business, such as lithium-ion battery cells
for our energy storage products. During the three and six months ended June 30,
2022, we experienced supply chain disruptions, including as a result of COVID-19
and macroeconomic conditions, causing delays in the timely delivery of material
to customer sites and delays and disruptions in the completion of certain
projects, including those pursuant to the SCE Agreement. This negatively
impacted our results of operations during the three and six months ended June
30, 2022. We expect the trends of supply challenges to continue for the
remainder of this year. We continue to monitor macroeconomic conditions to
remain flexible and to optimize and evolve our business as appropriate to
address the challenges presented from these conditions. For example, in April
2022, we entered into a binding framework agreement term sheet with a battery
manufacturer for the purchase and sale of BESS equipment for our BESS projects
at committed amounts and agreed upon delivery dates for a period of several
years. The purchase and sale commitment covers BESS equipment to be used for our
BESS projects and assets. In connection with entering into the term sheet, we
paid a $10 million deposit which will be credited against our future equipment
purchases.

In March 2022, the U.S. Department of Commerce announced that it is
investigating if certain solar cell and panel imports from Malaysia, Vietnam,
Thailand and Cambodia are circumventing anti-dumping and countervailing duty
orders. We do not expect that this investigation will have a material impact on
our business in the near term, as we have a stockpile of solar panels from a
large purchase several years ago. Furthermore, we believe that President Biden's
executive order issued in June 2022 further mitigates this risk. The order
authorized the U.S. Secretary of Commerce to implement regulations to shield
solar modules and cells imported from Malaysia, Vietnam, Thailand and Cambodia
from any anti-dumping and countervailing duties for up to 24 months from the
issuance of the order. In the longer term, the investigation and any resulting
duties and tariffs imposed may

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disrupt the solar panel supply chain, increase the cost for solar cells and panels and ultimately impact the demand for clean energy solutions. We are monitoring the investigation and any regulations issued by the U.S Secretary of Commerce closely.

Climate Change and Effects of Seasonality


The global emphasis on climate change and reducing carbon emissions has created
opportunities for our industry. Sustainability has been at the forefront of our
business since its inception, and we are committed to staying at the leading
edge of innovation taking place in the energy sector. We believe the next decade
will be marked by dramatic changes in the power infrastructure with resources
shifting to more distributed assets, storage, and microgrids to increase overall
reliability and resiliency. The sustainability efforts are impacted by
regulations, and changes in the regulatory climate may impact the demand for our
products and offerings. For example, we have taken advantage of Investment Tax
Credits for certain of our projects. See "Our business depends in part on
federal, state, provincial and local government support for energy efficiency
and renewable energy, and a decline in such support could harm our business" in
Item 1A, Risk Factors of our Q1 2022 Form 10-Q and "Compliance with
environmental laws could adversely affect our operating results" in Item 1A,
Risk Factors of our 2021 Form 10-K.

Climate change also brings risks, as the impacts have caused us to experience
more frequent and severe weather interferences, and this trend may continue. We
are subject to seasonal fluctuations and construction cycles, particularly in
climates that experience colder weather during the winter months, such as the
northern United States and Canada, and climates that experience extreme weather
events, such as wildfires, storms or flooding, or at educational institutions,
where large projects are typically carried out during summer months when their
facilities are unoccupied. In addition, government customers, many of which have
fiscal years that do not coincide with ours, typically follow annual procurement
cycles and appropriate funds on a fiscal-year basis even though contract
performance may take more than one year. Further, government contracting cycles
can be affected by the timing of, and delays in, the legislative process related
to government programs and incentives that help drive demand for energy
efficiency and renewable energy projects. As a result, our revenues and
operating income in the third and fourth quarter are typically higher, and our
revenues and operating income in the first quarter are typically lower, than in
other quarters of the year, however, this may become harder to predict with the
potential effects of climate change. As a result of such fluctuations, we may
occasionally experience declines in revenues or earnings as compared to the
immediately preceding quarter, and comparisons of our operating results on a
period-to-period basis may not be meaningful.

Our annual and quarterly financial results are also subject to significant fluctuations as a result of other factors, many of which are outside our control.

Stock-based Compensation


During the six months ended June 30, 2022, we granted 1,562,500 common stock
options to certain employees under our 2020 Stock Incentive Plan. As a result,
our unrecognized stock-based compensation expense increased from $41.1 million
at December 31, 2021 to $51.3 million at June 30, 2022 and is expected to be
recognized over a weighted-average period of three years years. See Note 15
"Stock-based Compensation" for additional information.

Backlog and Awarded Projects


Backlog is an important metric for us because we believe strong order backlogs
indicate growing demand and a healthy business over the medium to long term,
conversely, a declining backlog could imply lower demand.

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The following table presents our backlog:

                                                     As of June 30,
(In Thousands)                                   2022             2021
Project Backlog
Fully-contracted backlog                     $ 1,002,740      $   781,190
Awarded, not yet signed customer contracts     1,828,530        1,429,710
Total project backlog                        $ 2,831,270      $ 2,210,900
12-month project backlog                     $   756,700      $   606,490

O&M Backlog
Fully-contracted backlog                     $ 1,196,820      $ 1,121,230
12-month O&M backlog                         $    73,475      $    67,010


Our $892 million SCE Agreement was entered into in October 2021 and increased
our fully-contracted backlog for the six months ended June 30, 2022 as compared
to the six months ended June 30, 2021. We anticipate that the SCE Agreement will
be an important driver of our results in 2022.

Total project backlog represents energy efficiency projects that are active
within our sales cycle. Our sales cycle begins with the initial contact with the
customer and ends, when successful, with a signed contract, also referred to as
fully-contracted backlog. Our sales cycle recently has been averaging 18 to 42
months. Awarded backlog is created when a potential customer awards a project to
Ameresco following a request for proposal. Once a project is awarded but not yet
contracted, we typically conduct a detailed energy audit to determine the scope
of the project as well as identify the savings that may be expected to be
generated from upgrading the customer's energy infrastructure. At this point, we
also determine the subcontractors, what equipment will be used, and assist in
arranging for third party financing, as applicable. Recently, awarded projects
have been taking an average of 12 to 24 months to result in a signed contract
and convert to fully-contracted backlog. It may take longer, as it depends on
the size and complexity of the project. Historically, approximately 90% of our
awarded backlog projects have resulted in a signed contract. After the customer
and Ameresco agree to the terms of the contract and the contract is executed,
the project moves to fully-contracted backlog. The contracts reflected in our
fully-contracted backlog typically have a construction period of 12 to 36 months
and we typically expect to recognize revenue for such contracts over the same
period.

Our O&M backlog represents expected future revenues under signed multi-year customer contracts for the delivery of O&M services, primarily for energy efficiency and renewable energy construction projects completed by us for our customers.


We define our 12-month backlog as the estimated amount of revenues that we
expect to recognize in the next twelve months from our fully-contracted backlog.
See "We may not recognize all revenues from our backlog or receive all payments
anticipated under awarded projects and customer contracts" and "In order to
secure contracts for new projects, we typically face a long and variable selling
cycle that requires significant resource commitments and requires a long lead
time before we realize revenues" in Item 1A, Risk Factors in our 2021 Form 10-K.

Assets in Development


Assets in development, which represents the potential design/build project value
of small-scale renewable energy plants that have been awarded or for which we
have secured development rights, were estimated at $1.4 billion, which includes
$79.8 million attributable to a non-controlling interest at June 30, 2022, and
$1.1 billion at June 30, 2021. The portion related to spending for Energy as a
Service assets was approximately $60.0 million and $70.0 million at June 30,
2022 and 2021, respectively. This is another important metric because it helps
us gauge our future capacity to generate electricity or deliver renewable gas
fuel which contributes to our recurring revenue stream.

Results of Operations

All financial result comparisons made below are against the same prior year period unless otherwise noted.

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The following tables set forth certain financial data from the condensed consolidated statements of income for the periods indicated:

                                                                                             Three Months Ended June 30,
                                                       2022                                          2021                                     Year-Over-Year Change
(In Thousands)                           Amount             % of Revenues              Amount             % of Revenues                Dollar Change               % Change
Revenues                              $ 577,397                      100.0  %       $ 273,920                      100.0  %       $            303,477                 110.8  %
Cost of revenues                        496,094                       85.9  %         220,598                       80.5  %                    275,496                 124.9  %
Gross profit                             81,303                       14.1  %          53,322                       19.5  %                     27,981                  52.5  %
Selling, general and administrative
expenses                                 38,249                        6.6  %          31,882                       11.6  %                      6,367                  20.0  %
Operating income                         43,054                        7.5  %          21,440                        7.8  %                     21,614                 100.8  %
Other expenses, net                       5,249                        0.9  %           5,450                        2.0  %                       (201)                 (3.7) %
Income before income taxes               37,805                        6.5  %          15,990                        5.8  %                     21,815                 136.4  %
Income tax provision (benefit)            4,932                        0.9  %          (1,896)                      (0.7) %                      6,828                (360.1) %
Net income                               32,873                        5.7  %          17,886                        6.5  %       $             14,987                  83.8  %
Net (income) loss attributable to
redeemable non-controlling interest        (657)                      (0.1) %          (4,231)                      (1.5) %       $              3,574                  84.5  %
Net income attributable to common
shareholders                          $  32,216                        5.6  %       $  13,655                        5.0  %       $             18,561                 135.9  %

Our results of operations for the three months ended June 30, 2022 are due to the following:


•Revenues: total revenues for the three months ended June 30, 2022 increased
over 2021 primarily due to a $292.9 million, or 149%, increase in our project
revenues attributed to the timing of revenue recognized as a result of the phase
of active projects versus the prior year, including our SCE battery storage
project, and a $6.0 million, or 16%, increase in our energy asset revenue
attributed to the continued growth of our operating portfolio, strong renewable
gas production, and higher pricing on renewable identification numbers ("RINs")
generated from certain alternative fuel generation assets in operation.

•Cost of Revenues and Gross Profit: the increase in cost of revenues is
primarily due to the increase in project revenues described above. Gross profit
increased due to increased revenue, however, our gross profit as a percent of
revenues decreased due to the higher revenue contribution from our lower margin
SCE battery storage project.

•Selling, General and Administrative Expenses ("SG&A"): SG&A expenses for the
three months ended June 30, 2022 increased over 2021 primarily due to higher net
salaries and benefits of $4.4 million as a result of increased headcount and an
increase in non-cash stock compensation expense and higher insurance costs.

•Other Expenses, Net: Other expenses, net, includes gains and losses from
derivatives transactions, foreign currency transactions, interest expense,
interest income, amortization of financing costs and certain government
incentives. Other expenses, net for the three months ended June 30, 2022
decreased over 2021 primarily due to government incentive income of $2.0 million
and a gain on derivatives of $1.1 million compared to a loss of $1.6 million in
the prior year, partially offset by higher interest expenses of $3.3 million
related to an increase in amounts outstanding on our senior secured debt
facility.

•Income before Income Taxes: the increase in income before income taxes is due to reasons described above.


•Income Tax (Benefit) Provision: the provision for income taxes is based on
various rates set by federal, state, provincial and local authorities and is
affected by permanent and temporary differences between financial accounting and
tax reporting requirements. The effective tax rate was higher in 2022 as
compared to 2021 primarily due to higher domestic income resulting in higher
state taxes, lower levels of compensation deductions related to employee stock
option exercises, and less favorable tax adjustments related to partnership flip
transactions.

•Net Income and Earnings Per Share: Net income attributable to common
shareholders increased due to the reasons described above. Basic earnings per
share for the three months ended June 30, 2022 was $0.62, an increase of $0.35
per share compared to the same period of 2021. Diluted earnings per share for
2022 was $0.61, an increase of $0.35 per share compared to last year. The
results for the three months ended June 30, 2022 and 2021 reflect a non-cash
downward adjustment of $0.7 million and $4.2 million, respectively, related to
non-controlling interest activities.

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                                                                                               Six Months Ended June 30,
                                                        2022                                           2021                                    
Year-Over-Year Change
(In Thousands)                            Amount              % of Revenues              Amount             % of Revenues                Dollar Change                % Change
Revenues                              $ 1,051,399                      100.0  %       $ 526,122                      100.0  %       $            525,277                   99.8  %
Cost of revenues                          901,718                       85.8  %         425,891                       80.9  %                    475,827                  111.7  %
Gross profit                              149,681                       14.2  %         100,231                       19.1  %                     49,450                   49.3  %
Selling, general and administrative
expenses                                   77,941                        7.4  %          60,483                       11.5  %                     17,458                   28.9  %
Operating income                           71,740                        6.8  %          39,748                        7.6  %                     31,992                   80.5  %
Other expenses, net                        12,330                        1.2  %           9,122                        1.7  %                      3,208                   35.2  %
Income before income taxes                 59,410                        5.7  %          30,626                        5.8  %                     28,784                   94.0  %
Income tax provision                        7,239                        0.7  %             309                        0.1  %                      6,930                2,242.7  %
Net income                                 52,171                        5.0  %          30,317                        5.8  %       $             21,854                   72.1  %
Net (income) loss attributable to
redeemable non-controlling interest        (2,571)                      (0.2) %          (5,488)                      (1.0) %       $              2,917                   53.2  %
Net income attributable to common
shareholders                          $    49,600                        4.7  %       $  24,829                        4.7  %       $             24,771                   99.8  %


Our results of operations for the six months ended June 30, 2022 are due to the following:


•Revenues: total revenues for the six months ended June 30, 2022 increased over
2021 primarily due to a $505.6 million, or 149%, increase in our project
revenues attributed to the timing of revenue recognized as a result of the phase
of active projects versus the prior year, including our SCE battery storage
project.

•Cost of Revenues and Gross Profit: the increase in cost of revenues is
primarily due to the increase in project revenues described above. Gross profit
increased due to increased revenue, however, our gross profit as a percent of
revenues decreased due to the higher revenue contribution from our lower margin
SCE battery storage project.

•Selling, General and Administrative Expenses ("SG&A"): SG&A expenses for the
six months ended June 30, 2022 increased over 2021 primarily due to higher net
salaries and benefits of $11.7 million as a result of increased headcount and an
increase in non-cash stock compensation expense. The increase is also attributed
to higher miscellaneous expenses related to a settlement of an outstanding legal
proceeding and higher insurance costs.

•Other Expenses, Net: Other expenses, net, includes gains and losses from
derivatives transactions, foreign currency transactions, interest expense,
interest income, amortization of financing costs and certain government
incentives. Other expenses, net for the six months ended June 30, 2022 increased
over 2021 primarily due to higher interest expenses of $5.0 million related to
an increase in amounts outstanding on our senior secured debt facility. This was
partially offset by government incentive income of $2.0 million.

•Income before Income Taxes: the increase in income before income taxes is due to reasons described above.


•Income Tax (Benefit) Provision: the provision for income taxes is based on
various rates set by federal, state, provincial and local authorities and is
affected by permanent and temporary differences between financial accounting and
tax reporting requirements. The effective tax rate was higher in 2022 as
compared to 2021 primarily due to primarily due to higher domestic income
resulting in higher state taxes, lower levels of compensation deductions related
to employee stock option exercises, and less favorable tax adjustments related
to partnership flip transactions.

•Net Income and Earnings Per Share: Net income attributable to common
shareholders increased due to the reasons described above. Basic earnings per
share for the six months ended June 30, 2022 was $0.96, an increase of $0.47 per
share compared to the same period of 2021. Diluted earnings per share for 2022
was $0.93, an increase of $0.45 per share compared to last year. The results for
the six months ended June 30, 2022 and 2021 reflect a non-cash downward
adjustment of $2.6 million and $5.5 million, respectively, related to
non-controlling interest activities.

Business Segment Analysis


Our reportable segments for the three and six months ended June 30, 2022 were
U.S. Regions, U.S. Federal, Canada, Alternative Fuels (formerly Non-Solar
Distributed Generation ("Non-Solar DG")) and All Other. On January 1, 2022, we
changed the structure of our internal organization and our "All Other" segment
now includes our U.S.-based enterprise energy management services previously
included in our U.S Regions segment and our U.S. Regions segment now includes
U.S. project revenue and associated costs previously included in our former
Non-Solar DG segment. As a result, previously reported amounts have been
reclassified for comparative purposes. These segments do not include results of
other activities, such as corporate operating

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expenses not specifically allocated to the segments. See Note 16 "Business Segment Information" for additional information about our segments.


All financial result comparisons made below relate to both the three and six
month periods and are against the same prior year period unless otherwise noted.

Revenues
                                                 Three Months Ended June 30,                                                            Six Months Ended June 30,
(In Thousands)              2022               2021             Dollar Change             % Change                2022                2021        
    Dollar Change            % Change
U.S. Regions            $ 397,385          $ 118,023          $      279,362                  236.7  %       $   711,905          $ 207,267          $      504,638                 243.5  %
U.S. Federal              101,428             90,198                  11,230                   12.5              177,074            192,412                 (15,338)                 (8.0)
Canada                     14,461             10,875                   3,586                   33.0               31,633             22,518                   9,115                  40.5
Alternative Fuels          29,192             26,213                   2,979                   11.4               58,453             51,793                   6,660                  12.9
All Other                  34,931             28,611                   6,320                   22.1               72,334             52,132                  20,202                  38.8
Total revenues          $ 577,397          $ 273,920          $      303,477                  110.8  %       $ 1,051,399          $ 526,122          $      525,277                  99.8  %


•U.S. Regions: the increase is primarily due to an increase in project revenue
attributable to the timing of revenue recognized as a result of the phase of
active projects, including our SCE battery storage projects, versus the prior
year.
•U.S. Federal: the change in revenue is primarily due to the timing of project
revenue recognized as a result of the phase of active projects which were
impacted by supply chain delays during the first quarter of 2022.

•Canada: the increase is primarily due to an increase in project revenues attributable to the timing of revenue recognized as a result of the phase of active projects versus the prior year.


•Alternative Fuels: the increase is primarily attributed to higher energy asset
revenues resulting from the continued growth of our operating portfolio,
increased renewable gas production levels and higher pricing on RINs generated
from certain alternative fuel generation assets in operation.

•All Other: All other revenues increased over 2021 primarily due to higher
project revenues as a result of the phase of active projects versus the prior
year and an increase in integrated-PV revenue.

Income before Taxes and Unallocated Corporate Activity

                                                    Three Months Ended June 30,                                                         Six Months Ended June 30,
(In Thousands)                 2022               2021             Dollar Change            % Change              2022              2021             Dollar Change            % Change
U.S. Regions               $   32,840          $  7,718          $       25,122                 325.5  %       $ 51,058          $ 10,957          $       40,101                 366.0  %
U.S. Federal                   12,011            11,082                     929                   8.4            20,897            23,112                  (2,215)                 (9.6)
Canada                          1,012               749                     263                  35.1             1,291               664                     627                  94.4
Alternative Fuels               6,476             4,716                   1,760                  37.3            13,898            13,488                     410                   3.0
All Other                       3,139             1,817                   1,322                  72.8             5,848             3,462                   2,386                  68.9
Unallocated corporate
activity                      (17,673)          (10,092)         $       (7,581)                (75.1)          (33,582)          (21,057)                (12,525)                (59.5)
Income before taxes        $   37,805          $ 15,990          $       21,815                 136.4  %       $ 59,410          $ 30,626          $       28,784                  94.0  %


•U.S. Regions: the increase is primarily due to the increase in revenues
described above, partially offset by higher salaries and benefits and other
expenses.
•U.S. Federal: the increase for three months ended June 30, 2022 is primarily
due to increased revenues and the decrease for the six months ended June 30,
2022 is primarily due to the decrease in revenues described above.

•Canada: the increase is primarily due to the increase in revenue described above, partially offset by higher salaries and benefits.

•Alternative Fuels: the increase is primarily due to higher revenues noted above, partially offset by increased interest expenses.

•All Other: the increase is primarily due to the increase in revenues described above.


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•Unallocated corporate activity includes all corporate level selling, general
and administrative expenses and other expenses not allocated to the segments. We
do not allocate any indirect expenses to the segments. Corporate activity
increased primarily due to higher net salaries and benefit costs, insurance
costs, and interest expenses.

Liquidity and Capital Resources

Overview


Since inception, we have funded operations primarily through cash flow from
operations, advances from Federal ESPC projects, our senior secured credit
facility, and various forms of other debt. In addition, in March 2021, we
completed an underwritten public offering of 2,875,000 shares of our Class A
Common Stock, for total net proceeds of $120.1 million. See Note 7 "Debt and
Financing Lease Liabilities" for additional information.

Working capital requirements, which can be susceptible to fluctuations during the year due to seasonal demands, generally result from revenue growth, our solar equipment purchase patterns, the timing of funding under various contracts, or advances from Federal ESPC projects, and payment terms for receivables and payables.

We expect to incur additional expenditures in connection with the following activities:


•equity investments, project asset acquisitions and business acquisitions that
we may fund from time to time
•capital investment in current and future energy assets
•material, equipment, and other expenditures for our SCE battery storage project

We regularly monitor and assess our ability to meet funding requirements. We
believe that cash and cash equivalents, working capital and availability under
our revolving senior secured credit facility, combined with our right (subject
to lender consent) to increase our revolving credit facility by $100.0 million,
and our general access to credit and equity markets, will be sufficient to fund
our operations through at least August 2023 and thereafter. We funded a
significant portion of the contract expenditures for our SCE battery storage
project during the six months ended June 30, 2022. However, we continue to
evaluate and take action, as necessary, to preserve adequate liquidity and
ensure that our business can continue to operate and that we can meet our
capital requirements during these uncertain times. This may include limiting
discretionary spending across the organization and re-prioritizing our capital
projects amid times of political unrest, the evolution of the COVID-19 pandemic,
the duration of supply challenges, and the rate and duration of the inflationary
pressures. For example, recent increases in inflation and interest rates have
impacted overall market returns on assets. We have therefore been particularly
prudent in our capital commitments over the past couple of quarters, ensuring
that our assets in development continue to align with our hurdle rates.

Sources of Liquidity

Senior Secured Credit Facility


On March 4, 2022, we entered into the fifth amended and restated senior secured
credit facility, which increased the aggregate amount of total commitments from
$245.0 million to $495.0 million. This amendment increased the aggregate amount
of the revolving commitments from $180.0 million to $200.0 million, increased
the existing term loan A to $75.0 million, and extended the maturity date of the
revolving commitment and term loan A from June 28, 2024 to March 4, 2025. In
addition, it added a delayed draw term loan A for up to $220.0 million through a
September 4, 2023 maturity date, increased the total funded debt to EBITDA
covenant ratio from a maximum of 3.50 to 4.50 for the quarter ended March 31,
2022; 4.25 for the quarter ending June 30, 2022, 4.00 for the quarters ending
September 30, 2022 and December 31, 2022; and 3.50 thereafter. The amendment
also specified the debt service coverage ratio to be less than 1.5 and increased
our limit under an energy conversation project financing to $650.0 million,
which provides us with flexibility to grow our federal business further. As of
June 30, 2022, the balance on the senior secured term loans was $275.0 million,
the balance on the senior secured revolving credit facility was $165.0 million,
and we had funds available of $19.6 million.

On June 9, 2022, we entered into the first amendment to the fifth amended and
restated senior secured credit facility, which increased the maximum
indebtedness incurred under an energy conservation project financing from $650.0
million to $725.0 million from and after April 1, 2022 to and including December
30, 2022.

Project Financing - Non-recourse Revolvers, Loans and Financing Facilities


We have entered into a number of construction and term loan agreements for the
purpose of constructing and owning certain renewable energy plants. While we are
required under generally accepted accounting principles ("GAAP") to reflect
these loans as liabilities on our consolidated balance sheets, they are
generally non-recourse and not direct obligations of Ameresco, Inc.

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During the six months ended June 30, 2022, we received gross proceeds from these
non-recourse financings of $32.9 million. At June 30, 2022, the balance
outstanding on our non-recourse debt was $358.0 million and approximately $380.1
million remained available under these lending commitments, which expire at
various dates from July 2022 through July 2024. Approximately $11.5 million of
this lending commitment expired July 15, 2022. We expect to renew this
commitment before the end of fiscal year 2022. See Notes 6. "Leases" and 7.
"Debt and Financing Lease Liabilities" for additional details.

© Edgar Online, source Glimpses

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